Bank of America CEO Moynihan Did Not Get a Pay Increase. It Was Worse Than That

Paul Hodgson
, ContributorI write about governance matters because it does.Opinions expressed by Forbes Contributors are their own.

I was woken this morning with the news that Brian Moynihan, CEO of Bank of America, had received a 73 percent pay rise, even though the bank was still sorting through all its troubles. As I trawled through all the news sources, this was what was unquestioningly repeated over and over again. Even from this venerable news service.

Bank of America CEO Brian Moynihan speaks during the Summit Meeting on the Future of Housing in California on February 12, 2013 in Oakland, California. (Image credit: Getty Images via @daylife)

Apart from the fact that we are in a sorry state for news if we have to ferret for it through bank Form 4s (the SEC filing where this “news” was found that records changes in stock ownership and therefore stock awards for executives and directors), it is simply not true that he received any kind of real pay increase at all.

What did increase compared to last year was the number of stock units that were awarded to Moynihan, and of course, since the stock’s value has been rebounding, the actual value of those stock units. What they will be worth in the one to three years’ time it takes for them to vest, and for some of them performance targets will have to be met, is anyone’s guess. It could be less than what he was "awarded" last year.

So, no, not a pay increase.

But there was news here. News that is much more troubling than any pay increase. The news is the continued decoupling of large parts of Moynihan’s pay from any kind of long-term performance.

First the filing, which is here. It says that he received 277, 871 cash settled restricted stock units, 463,119 performance stock units, and 185,248 restricted stock units. In other words a full half of his stock award vests solely according to time passing, most of it beginning to vest in as little as a month from today. Hardly long-term.

Now, I really can’t be bothered to look up the Form 4 from early last year to figure out how much stock was awarded in 2012. Do you know how many Form 4s Bank of America files every month? It’s a lot. And I’ve got better things to do with my life. But I can guess that the form of award was pretty similar since this most recent Form 4 for Moynihan records the final vesting of the cash settled restricted stock units that were awarded around this time last year.

The more important point is that back in 2011, the bank awarded Mr. Moynihan’s entire stock award in the form of performance restricted stock units, valued at $6,111,959 at the time, and worth considerably more now. The thing is we won’t know if they are worth anything at all until the end of the performance period, December 31, 2015, when the compensation committee will figure out if any of them will vest based on the company’s return on assets over the period. If they do, that WILL be a pay increase.

For the current performance award, half are based on the bank’s three year average return on assets and half on its three year average growth in adjusted tangible book value, but over a shorter overall time period, also ending on December 31, 2015. Again, if these vest, and the stock price either maintains or grows its value that WILL be a pay increase. But pay is likely to go up anyway, because Moynihan’s time-restricted stock will vest regardless of performance.

So why are we going backwards here?

As I said in my article on bank pay posted today by Responsible Investor in the UK, “US investment bank compensation policy hasn’t even caught up with post-2009 European bank compensation practices…. It’s time for change. And that change could do worse than emulate the Europeans.”